The cost of employee health insurance

Health insurance is one of the most important benefits you can offer, but unfortunately, the costs can add up for a business. However, your company will need to find a solution that works well from both a business perspective and for the workers. Let's learn a little more about what the real cost of employee health insurance is and how you can pick the right choice for your business and circumstances.

Why employee health insurance is necessary

As the owner of a business, you know how valuable offering employee benefits are, but you may not have a complete understanding of their importance. After all, it does require a large portion of your budget to be devoted to providing this kind of benefit, despite the fact that business owners are not required to by law. Here are some of the most notable advantages of providing health insurance to those who work for your company.

Tax credit

The government offers an incentive for small businesses to offer health insurance coverage to their employees through a health care tax credit. The tax credit can help offset the cost of this benefit. Not every company qualifies for a small business health care tax credit, but you can apply to find out. The program is called the Small Business Health Options Program (SHOP) and it assesses the following before granting a tax credit:

• Fewer than 25 full-time employees.
• The average employee salary is $56,000 per year or less.
• The company pays at least 50% of the premium cost.

For more information, go to HealthCare.gov's small business health care tax credit estimator. If you don't qualify here, the business could also find benefits from the provisions of The Income Tax Act.

Group health insurance purchasing power

Another great reason to look into offering employer-sponsored health insurance is the advantages that come with a group purchasing the product. This means that rates are more affordable because a group of people is using the insurance, which means that you and your employees are both saving money in the long run. Even if the company doesn't provide insurance, they can also sometimes get the group rate through your business. 

Worker wellness

At the end of the day, health insurance is there to make sure that the individual has more access to health care. The average cost of seeing a doctor can be extremely expensive, and health insurance makes it more affordable. Because this health benefit will ultimately make your workers healthier in the long term, they will be able to do their best work for the business for a longer period of time. Instead of the employee taking sick leave because of a preventable illness, health insurance can help them nip it in the bud.

Retain employees

Health insurance is extremely important to most American employees and it can boost employee retention, which is something that most business owners are extremely cautious about. According to a study by SHRM, “56% of U.S. adults with employer-sponsored health benefits said that whether or not they like their health coverage is a key factor in deciding to stay at their current job.”

Workers need to feel supported, and health insurance coverage is one of the most important key benefits that you can provide to do that. During a time when employees are not afraid to leave their place of work if they aren't happy, it's more important than ever to focus on employee retention.

There are many different types of employer sponsored health insurance that is available in the marketplace, and you can work with a professional to help you find the right fit for your business. As you can tell by now, there are many advantages to offering health insurance coverage to your employees — but how much of your budget should you devote to the benefit?

The cost of employee health insurance

When it comes down to it, you need to know how much it costs to give your employee health insurance. Money matters, and understanding how this benefit fits into your yearly plan and budget is the best first step to take before picking the right plan. According to Zippia, small business employers pay for about “83% of single-coverage employee health insurance plans, and 73% of family coverage plans.”

While most goods and services have increased in price, a report from Keiser Family Foundation (KFF) found that both single and family health insurance had only risen 4% in 2021 which is modest. Even with increasing health care costs, the amount that employers pay ranges widely. Here are some examples of different payment options from The Employer Health Benefits 2021 Summary of Findings from KFF:

• 12% of employers paid the entire health insurance premium for individual health insurance coverage.
• 4% of employers paid the entire family plan premium.
• 13% of covered employees contribute more than one-half of the family coverage monthly premium.

There is no one size fits all solution, which is why it helps to work with a professional who knows the marketplace and can offer advice.

What employees require from their insurance

When offering coverage to your staff, it's valuable to know what they want from the insurance that you will be partially paying for. You can start by going the old-fashioned route and ask the employees themselves what they want from their coverage through a survey. It's also important to know what the general worker expects from their insurance so your business can offer a competitive benefit.

According to a Fractl survey of 2,000 workers, “88% of job seekers give some consideration' or 'heavy consideration' to better health, dental and vision insurance benefits when choosing between a high-paying job and a lower-paying job with better benefits.” So the more health benefits that you can offer your employees, the more you will stand out in the job market. For example, an SHRM 2020 Employee Benefits survey found that there was a large increase in employers looking into providing supplemental health benefits while still offering overall health benefits, maybe in the form of a high-deductible health plan.

In addition, more employees are taking advantage of health care benefits to boost their mental health. Because of this, it could be beneficial to make sure that mental health care services are abundant in the network. As some people are still struggling with the impacts of COVID-19 pandemic or reeling from the aftermath, employers are beginning to take note. According to a SHRM survey, “25% of employers increased their mental health service offerings during the pandemic.” To stay current in the job market and retain employees, consider special mental health benefits.

Finding the right employee health insurance

With so many considerations that go into picking the right employee health insurance, it can be hard to know what the right choice is. The first step is to understand the types of health insurance plans that are available. Here are some examples:

• Health Maintenance Organization (HMO): Usually limits coverage to specific healthcare workers who work for the HMO
• Point of Service Plan (POS): In most cases, the insured pays less if you use health care providers that belong to the plan's network.
• Preferred Provider Organization (PPO): Relies on contracts with medical providers, to create a network of providers who want to participate.
• Exclusive Provider Organization (EPO): Services are covered only if you go to a health care professional in the network (except in an emergency).

If you're still not sure where to start, you can work with an actuary service like Lewis & Ellis to find the right fit. We can help you design a strategy that will not only work for your organization now but is cutting-edge enough that it will work for the dynamic marketplace. To get started, contact a Lewis & Ellis consultant today.